Oil prices hit high but report warns of supply crunch

Analysts have been surprised at the recent resilience of oil prices given the impact on energy demand of the global recession. In spite of this year’s volatility in the oil price, the underlying trend for a decade has been for it to rise steadily.

A report from the non-governmental organisation Global Witness – famous for its expos
Two years in the preparation, Global Witness’s report, Heads in the Sand, accused governments of ignoring the fact that the world could soon start to run short of oil. This would lead to huge consequences in terms of price shocks and much higher levels of violence around the world than last year’s food riots.

“There is a train crash about to happen from an energy point of view. But politicians everywhere seem to have entirely missed the scale of the problem,” said the report’s author, Simon Taylor.

“We are all addicted to oil but if you look at the mathematics of the problem, they simply don’t add up in terms of future supply and demand.”

The report went through the latest figures from the oil industry and the Paris-based International Energy Agency, which last year drastically reduced its estimate of the available oil.

Taylor said even the new IEA projections of how much new oil the world would discover were likely to be over-optimistic. He said the so-called “big” oil discoveries of the last few years added up to nothing like the “discovery rate” needed to replace the world’s dwindling supplies from existing fields. They have totalled around 16bn barrels, or only around 1.7m barrels a day, once up and running.

Guardian